> Seadrill orders two new ultra-deepwater drillships for delivery in 2014

Seadrill orders two new ultra-deepwater drillships for delivery in 2014

Monday, Feb 27, 2012

Seadrill has in the last year seen a surge in long-term demand for tender rigs and modern ultra-deepwater drilling rigs. The increased demand for ultra-deepwater rigs has been driven by high oil prices and significant exploration successes in both new as well as established deepwater regions leading to a ramp-up in drilling programs. The growth in rig demand has been particularly strong in the US, East and West Africa regions. In addition to oil price and exploration successes, the industry's focus on safety following the Macondo accident, has supported demand for higher specification rigs as well as leading to increased drilling time per well.

Based on these developments and analysis of the rig market, Seadrill has concluded that it is highly likely that lack of sufficient rig availability in the deepwater market will become a key bottleneck until significant new drilling capacity is added. If oil prices remain at present levels, this tight supply demand balance will force oil companies to postpone field developments with negative impact on the net present value of these discoveries.

Seadrill is of the opinion that the present and foreseeable developments represent a unique investment opportunity. In order to benefit from this opportunity, Seadrill is currently in discussions with several shipyards to further increase the Company's rig availability in 2014 and thereafter. As a first step, Seadrill has entered into turnkey contracts to build two new ultra-deepwater drillships at Samsung in South Korea. The construction of the drillships is scheduled for completion in the second and third quarter 2014. Total project price per drillship is estimated to be under US$600 million, which includes a turnkey contract with the yard, project management, drilling and handling tools, spares, capitalized interest and operations preparations. Seadrill has also a fixed price option to order an additional drillship for delivery in 2014.

The drillships are of the same design as the three previous dual derrick drillships that Seadrill ordered at Samsung late 2010 and early 2011, with increased water depth, technical capabilities and accommodation capacities. These dynamic positioning drillships will have a hook load capability of 1,250 tons and a water depth capacity of up to 12,000 feet targeting operations in areas such as the Gulf of Mexico, Brazil as well as West and East Africa. In addition, these units will be outfitted with seven ram configuration of the Blow out Preventer (BOP) stack and with storing and handling capacity for a second BOP.